SM SM Energy Company

In an interim update, independent oil and gas operator, Range Resources Corporation (RRC) announced that it achieved record production in the fourth quarter of 2011. The production increased 16% on both a year-over-year as well as sequential basis to reach an average production volume of 625 million cubic feet of gas equivalent (Mmcfe) per day.

Production for full-year 2011 climbed 12% compared to 14% in 2010 and averaged 554 Mmcfe per day. Despite the sale of Barnett assets in April 2011, Range saw the eighth consecutive year of double-digit production growth. The 12% production growth in 2011 would have been 36%, adjusting for the sale of the Barnett properties.

Range also declared its preliminary natural gas, natural gas liquids (NGL’s) and oil price realizations (including the impact of cash-settled hedges and derivative settlements) for fourth quarter 2011. The average price realization of $5.44 per thousand cubic feet of gas equivalent (Mcfe) grew 2% from prior-year period.

Production of natural gas, natural gas liquids and crude oil averaged 491 Mmcfe, 16,931 barrels per day and 5,409 barrels per day, respectively. The price realized by natural gas, natural gas liquids and crude oil were $4.14, $54.31 and $83.71, respectively.

The company increased its commodity hedge position during the fourth quarter, with approximately 75% of its estimated natural gas production for 2012 hedged at a weighted average floor of $4.45 per million British thermal units (Mmbtu). Range has also hedged the majority of its 2013 projected natural gas production at a floor price of $4.73 per Mmbtu.

However, considering the company’s exposure to volatile natural gas fundamentals, interest rate risks and an uncertain macro backdrop, we maintain our long-term Underperform recommendation. Headquartered in Fort Worth, Texas, Range Resources competes with EQT Corporation (EQT), SM Energy Company (SM) and Ultra Petroleum Corp. (UPL).

Range holds a Zacks #4 Rank, which translates into a Sell rating for a period of one to three months.

 
EQT CORP (EQT): Free Stock Analysis Report
 
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